Andrew Willis, a reporter with the Globe and Mail, Canada's National Newspaper, reported in an article that Canada's rich are giving away fortunes. The article honors Mr. Donald Johnson, an investment banker, philanthropist and the chief lobbyist for a change to Canada's tax laws to facilitate greater charitable gifts to nonprofits. See Canada's Rich Giving Away Fortunes. The spur for the flood of increased giving is attributed to a change in Canada's tax law that began in 1997 and culminated in further changes in 2006. Pre-1997 and the lobbying of Mr. Johnson, stock donations incurred a capital gains tax. In 1997, the tax law was changed, cutting the capital gains tax on stock donations by 50 percent. In the wake of Canada's experience with reducing the capital gains tax by 50 percent, the law again was changed in 2006 to wholly eliminate the capital gains tax on donated stock. According to the article,"gifts of stock to Canadian charities, negligible before 1997, total[ed] $3-billion in the past decade." The change in 2006 has seen a watershed of charitable donations of stock by wealthy Canadians.

In a recent article published in Canada's National Newspaper, The Globe and Mail, it was reported that the Tax Court of Canada upheld a one-year suspension of the issuance of tax-receipts to donors of charitable gifts to one of Canada's largest charities, The International Charity Association Network ("ICAN"). This charity is relatively young, and grew its donations in its first years of operations from $500,000 to more than $400 million. The Canada Revenue Agency ("CRA"), which issued the suspension, alleges that ICAN is nothing more than a tax-shelter that provides inflated tax receipts to donors and lacks adequate valuation records to support the receipts. Further, the CRA alleges that ICAN cannot support its claims of ongoing charitable activities in support of various charitable agencies across Canada. See excerpt below,

ICAN's operations, however, have caught the attention of the Canada Revenue Agency, which suspended the organization's tax-receipt privileges for one year in November. The CRA alleged in a court filing that the Toronto-based organization did not have proper records to back up its activities and the agency signalled that tax officials are auditing more than 34,000 Canadians who participated in a related ICAN donation program.

"The CRA proposes to deny the entire amount of the donation," Holly Brant, an auditor in the CRA's Charities Directorate said in an affidavit filed in court.

. . .

But in his ruling released this week, Mr. Justice Gerald Rip of the Tax Court sided with CRA and raised concerns about some of ICAN's activities. "Ms. Brant's descriptions of amounts of income "Ms. Brant's descriptions of amounts of income collected by ICAN and disbursements to [related company] Global Group and receipts given for [one type of gift] are disturbing," the judge said. Judge Rip also said he was not impressed by the affidavits filed by Mr. Penney and Ms. French.

In light of the distinctions between the two types of nonprofit corporations, this article proposes that the Florida Legislature include a standing provision in the Florida Not for Profit Corporation Actthat ensures that directors, of both mutual benefit and public benefit nonprofit corporations, are held accountable to all of the constituencies they serve. This article argues that Florida 's current approach, while adequately protecting the interests of mutual benefit nonprofit corporations, does not achieve for many public benefit nonprofit corporations its desired goal of protecting nonprofit corporations from the harmful acts of directors. Florida's approach to standing leaves the actions of directors of public benefit nonprofit corporations virtually untouchable and unchallengeable.

Tell Professor Gilmore you read about her article on the Nonprofit Law Prof Blog!

Recently, a Brooklyn Rabbi entered a not guilty plea to a charge involving the fraudulent use of charities to geneterate tax deductions. According to one New York article:

Authorities say Weisz helped solicit millions of dollars in contributions to five Spinka charitable groups by promising to secretly refund up to 95 percent of the donations. That way, the contributors could falsely claim higher tax deductions, authorities said.

On January 3, 2008, the New York Times reported that a recent study in the New England Journal of Medicine reveals that hospital delays in defibrillation increases the likelihood of death of cardiac patients. Here is the abstract of the study:

Background Expert guidelines advocate defibrillation within2 minutes after an in-hospital cardiac arrest caused by ventriculararrhythmia. However, empirical data on the prevalence of delayeddefibrillation in the United States and its effect on survivalare limited.

Methods We identified 6789 patients who had cardiac arrest dueto ventricular fibrillation or pulseless ventricular tachycardiaat 369 hospitals participating in the National Registry of CardiopulmonaryResuscitation. Using multivariable logistic regression, we identifiedcharacteristics associated with delayed defibrillation. We thenexamined the association between delayed defibrillation (morethan 2 minutes) and survival to discharge after adjusting fordifferences in patient and hospital characteristics.

Results The overall median time to defibrillation was 1 minute(interquartile range, <1 to 3 minutes); delayed defibrillationoccurred in 2045 patients (30.1%). Characteristics associatedwith delayed defibrillation included black race, noncardiacadmitting diagnosis, and occurrence of cardiac arrest at a hospitalwith fewer than 250 beds, in an unmonitored hospital unit, andduring after-hours periods (5 p.m. to 8 a.m. or weekends). Delayeddefibrillation was associated with a significantly lower probabilityof surviving to hospital discharge (22.2%, vs. 39.3% when defibrillationwas not delayed; adjusted odds ratio, 0.48; 95% confidence interval,0.42 to 0.54; P<0.001). In addition, a graded associationwas seen between increasing time to defibrillation and lowerrates of survival to hospital discharge for each minute of delay(P for trend <0.001).

Conclusions Delayed defibrillation is common and is associatedwith lower rates of survival after in-hospital cardiac arrest.

The [AIP] studied 29 charities for veterans and found 20 engaging in such egregious practices as high overhead costs, high-cost solicitations and huge salaries for charities' executives, with less than a third of the donations set aside for veterans. For every dollar raised, one group gave only one penny to veterans. Another paid its top executive and his wife a combined $540,000 in salaries and benefits. Only five of the 29 charities surveyed in the watchdog report earned A-plus grades; 12 got F's and eight had D's.

On January 1, 2008, the Boston Globe reported that a Boston area nonprofit (Big Sisters Association of Greater Boston) is suing another Boston area nonprofit (Big Brothers and Big Sisters of Massachusetts Bay) in federal court over the name "Big Sisters." Here is an excerpt:

In a rare public dispute between two prominent local charities, the Big Sister Association of Greater Boston has sued Big Brothers Big Sisters of Massachusetts Bay for trademark infringement, alleging that Big Brothers' decision last year to add "Big Sisters" to its name has created public confusion about the groups' identities.

. . .

Big Sister, founded in 1951, provides guidance and support to young girls in the Boston area, while for most of its history Big Brothers of Massachusetts Bay, founded in 1949, focused on mentoring and supporting Boston-area young boys. In 1998, Big Brothers of Massachusetts Bay also began providing services to girls, although for the next eight years its name continued to suggest the group had a single-sex mission.

On January 1, 2008, the New York Times reported that 527 Groups are having a significant influence on the possible results of the pending Iowa primaries. Here is an excerpt from the article:

Spurred by a recent Supreme Court decision, independent political groups are using their financial muscle and organizational clout as never before to influence the presidential race, pumping money and troops into early nominating states on behalf of their favored candidates.

The groups are prohibited from coordinating their efforts with the campaigns. But the candidates, while often distancing themselves from these efforts, certainly benefit from their activities. Iowa airwaves have been filled with commercials from these groups as they take advantage of the June ruling that lifted a ban on broadcast messages from independent groups within 30 days of a primary or caucus.

. . .

The June ruling, in a case involving a Wisconsin anti-abortion group, allowed television issue advertisements from third-party groups — whether unions, corporations or wealthy individuals — to run right up to an election day. Under the McCain-Feingold law, which limits the role of money in campaigns, these spots had to cease 30 days before a primary election and 60 days before a general one.

Courts reviewing proposed mergers of nonprofit hospitals have been abandoning the bedrock principles of antitrust law, failing to pay heed to the most elemental hallmarks of socially beneficial competition - maximizing allocative efficiency and total surplus. This article suggests that courts' inability to recognize antitrust concerns in these cases reflects a failure to understand the structural details of the American health care market. After reviewing recent cases in which courts have denied challenges to proposed mergers between nonprofit hospitals, it documents how courts have engaged in a faulty analysis that ultimately protect nonprofit hospitals from the rigors of standard antitrust scrutiny. It then identifies the bedrock principles of antitrust law - preventing supracompetitive prices, optimizing output, and maximizing allocative efficiency - that have been absent from, if not violated by, the rulings in these merger cases.

Please let Professor Richman's Duke Law School colleagues know you read about his article on the Nonprofit Law Prof Blog.

Over the past six months the General Accounting Office (GAO) has been reporting on the causes of the tax gap -- the differences between taxes owed and taxes collected (currently around $350 billion, according to some estimates). A GAO study reports that nonprofit organizations owe about $1 billion in back taxes -- primarily payroll taxes. Here is an excerpt from the report dated July 24, 2007.

What GAO Found:

Nearly 55,000 exempt organizations had almost $1 billion in unpaid federal taxes as of September 30, 2006, with charitable organizations being responsible for more than 85 percent of the $1 billion in debt. About 1,500 of these entities each had over $100,000 in federal tax debts, with some owing multi-million dollars in federal taxes. The majority of this debt represented payroll taxes and associated penalties and interest dating as far back as the early 1980s. Willful failure to remit payroll taxes is a felony under U.S. tax law. The $1 billion figure is understated because some exempt organizations have understated tax liabilities or did not file tax returns.

Now, identical bills introduced in both the House and the Senate on December 19, 2007 would prohibit the award of federal contracts or grants to organizations with "seriously delinquent tax debts." The House Bill (HR 4881) is here: Download taxdebtorbill.rtf , the Senate Bill (S 2519) is here: Download taxdebtorbill2.rtf . The Bills, if enacted, would enact the "Contracting and Tax Accountability Act of 2008." Here is the statutory language defining "seriously delinquent tax debt:"

(3) SERIOUSLY DELINQUENT TAX DEBT. --

(A) IN GENERAL. -- The term "seriously delinquent tax debt" means an outstanding debt under the Internal Revenue Code of 1986 for which a notice of lien has been filed in public records pursuant to section 6323 of such Code.

(B) EXCEPTIONS. -- Such term does not include --

(i) a debt that is being paid in a timely manner pursuant to an agreement under section 6159 or section 7122 of such Code; and

(ii) a debt with respect to which a collection due process hearing under section 6330 of such Code, or relief under subsections (a), (b), or (f) of section 6015 of such Code, is requested or pending.

For the administrative rules relating to the awarding of grants and contracts to exempt organizations, see OMB Circular A-110.

* Fundraising and financial sustainability. Fundraising is the most pressing organizational issue requiring improvement based on chief executive and board member responses. Less than half (46 percent) of charities reported full board participation in giving. On average, just under three quarters of each board's members give to the organization. Many are uncomfortable asking for donations.

* Board demographics and diversity. The 2007 Index found that nearly half (49 percent) of nonprofit chief executives surveyed were somewhat or very dissatisfied with board diversity. Chief executives ranked board composition as a leading challenge for nonprofit boards, second only to fundraising, but board members ranked diversity further down the list at number five.

Despite chief-executive concerns, the demographic makeup of nonprofit boards has remained fairly consistent for more than a decade. The majority of board members are White (86 percent), male (57 percent) and older (49 percent were 50 to 64 years old).

The BoardSource report shows that board and budget size tend to influence the demographics of boards. As nonprofit budgets increase, boards are likely to include more African Americans and people age 65 and older, but fewer women and young people.

* Board oversight of CEO. The nonprofit chief executive is typically a board of directors' only employee, yet just over a quarter of organizations (26 percent) do not conduct a formal, written evaluation of the CEO by the board.

On December 29, 2007, the Washington Post reported that a federal court overturned a $156 million award against a former Muslim charity that was once considered the nation's largest. The jury concluded that the plaintiffs failed to prove that money donated to a Hamass was a factor in the killing of an American teenager in Israel. Here is an excerpt from the article:

[U.S. District Judge] Arlander said the defendants -- defunct charities, the Holy Land Foundation for Relief and Development, and the American Muslim Society/Islamic Association for Palestine; and a man named Mohammed Salah -- were liable for damages because they paid Hamas in 1993 and 1994 for speaking engagements and distributed propaganda for the group.

In yesterday's strongly worded opinion, . . . Ilana Diamond Rovner[, a judge on the U.S. Court of Appeals for the 7th Circuit,] wrote: "Belief, assumption, and speculation are no substitutes for evidence in a court of law. . . . We must resist the temptation to gloss over error, admit spurious evidence, and assume facts not adequately proved simply to side with the face of innocence and against the face of terrorism."

From today until the end of January, Nonprofit Blog will daily highlight the more than 100 law nonprofit- and tax exemption-related review/journal articles published in 2007. We won't get to them all, obviously, but we'll give special emphasis to young up and comer's in the academy -- so as to also introduce new scholars in the field -- while also including academic veterans in the field. If you know of someone who fits the former description and who has published an article in the field, please drop us a line and we will feature that person's work on the Blog. Here is the first entry:

Though they are sometimes regarded as corrupt, the complete cessation of existing interlocking boards in healthcare nonprofits is not immediately attainable and arguably not always desirable. This article comments that the doctrine of fiduciary duties should be modified to encompass the reality of overlapping boards; to recognize the trend toward more global, comprehensive, and proactive governance in the healthcare sector; and to enable directors to decipher, document, and resolve conflicts at a more meaningful point in their decision-making processes by expanding the doctrine of the duty of obedience.

To facilitate the discussion, the article draws on three examples of overlap in nonprofit boards of directors that help to illustrate the possible outcomes that could result from a shift in the doctrine of fiduciary duties. The article then discusses the deficiencies in the doctrine of fiduciary duties as traditionally understood and seeks to redefine the duty of obedience by bifurcating the guiding mission of the organization into “charter mission” and “licensure mission.” The article then briefly addresses the reasons that the traditional corporate approach is insufficient for healthcare nonprofits. Finally, the article sets forth a proposal that includes procedural and substantive modifications to achieve the level of guidance and doctrinal consistency that directors and their organizations so clearly need.

Please tell Professor Huberfeld's UK colleagues you read about her article on Nonprofit Law Blog!

On December 18, 2007, the Los Angeles Times reported that a group formerly known as Lashkar-e-Taiba, or Army of the Righteous, and formed more than 20 years ago with the support of the Pakistani government launched attacks against India in the dispute over the Kashmir region. Here is an excerpt:

Lashkar-e-Taiba was designated as a terrorist organization by the United States in December 2001 and was soon outlawed by Pakistan. It disbanded, but its founders created another group named Jamaat ud-Dawa, which functions openly in Pakistan as an officially recognized humanitarian organization. . . .

Representatives of Jamaat ud-Dawa say they are running a legitimate charity, citing the group's campaign to help Pakistanis recover from a massive earthquake in 2005 and its efforts to provide social services, food, water, medical care and education. Lashkar-e-Taiba, they say, no longer exists.

On December 29, 2007, the Los Angeles Times reported that 6 French charity aide workers who were sentenced to 8 years of hard labor Chad for trying to kidnap over 100 children were transferred home to France on Friday and jailed shortly thereafter. Here is an excerpt from the article:

Chadian authorities stopped the aid group's convoy with the children, ages 1 to 10, in October. The charity had planned to fly the children to France, saying it was driven by compassion to help orphans in Darfur, the conflict-torn western Sudanese region that borders Chad. They were to be placed with foster families in Europe.

On December 13, 2007, Representative Walter Jones (R-NC) introduced H. Res. 874, which recognizes the establishment in July 2007 of the Congressional Philanthropy Caucus. Here is an excerpt from the Resolution:

Whereas philanthropy is a uniquely American phenomenon and one that isspreading rapidly around the world;

Whereas Americans gave a record $295,000,000,000 dollars to charities in2006, according to Giving USA 2007;

. . .

Whereas Congress and the philanthropic sector must find a way to worktogether to produce healthier communities, more educated children, higherrates of employability and employment, decent housing, and compassion forthose who cannot compete: Now, therefore, be it

Resolved, That it is the sense of the United States House ofRepresentatives that--

(1) Congress and the philanthropic sector should partner to create a legislative and regulatory environment that enhances the growth of philanthropy;

(2) the Congressional Philanthropy Caucus will help lawmakers and congressional staff learn more about foundations and the role these organizations play in our communities and around the globe;

(3) the Congressional Philanthropy Caucus will highlight issues of mutual interest to both Congress and the philanthropic sector; and

(4) lawmakers are encouraged to join the Congressional Philanthropy Caucus.

For the full text of the Resolution, see 110 H. Res. 874, which is available on Lexis at 110 H. Res. 874.

On December 30, 2007, the Washington Post reported that young people are now beginning to give to charity is rising numbers. Here is an excerpt:

Young children and teenagers across the nation are getting involved in philanthropy more than ever, according to research and nonprofit experts, who credit new technologies with the rise of the trend. As young people increasingly become exposed to and connected with the problems of the world via the Internet and television, experts said, parents are finding new ways to instill in their children the value of giving.

At the same time, technology is democratizing philanthropy so giving is not only easier for people of all ages and means, but also trendier. And children are starting to organize at the grass-roots level to give.

On December 30, 2007, the New York Times reported that Mayor Michael Bloomberg's administration will jettison the federal poverty standard for identifying the poor and use its own standard when determining entitlement to government services. Here is an excerpt:

The 42-year-old federal poverty standard, which is pegged to the annual cost of buying basic groceries, is widely viewed as outdated and off-target. The city’s formula would take into account the money families must spend annually on necessities including rent, utilities and child care. But it would also factor in the value of financial assistance received, like housing vouchers or food stamps.